Some of these periods include strong equity market performance, the retirement of a
spouse, or if they participated in a defined benefit (DB) pension plan. “A 10% increase in the S&P 500 index results in
a 25% increase in the likelihood that individuals will retire,
compared to a year in which the S&P 500 index performance was
flat–all other factors being equal” said Professor Rui Yao of the
University of Missouri, who conducted the study for Prudential
Financial.

However, an analysis of the historical returns of the
S&P 500 index from 1926 to 2010 shows that the stronger equity markets perform over a prior three-year
period, the more likely it is that they will fall in the subsequent
year. As a result, Americans are more likely to
choose to retire at a time when there is more risk that their retirement
assets will decline in value just after retiring.

The study also found that pre-retirees with only defined
benefit plans are almost twice as likely to retire in any given year
versus those covered only by a defined contribution plan. Furthermore,
pre-retirees with a retired spouse are almost two and a half times as
likely to retire in any given year as their counterparts with a working
spouse.

“The study’s findings highlight the risk individuals take
if they retire and haven’t protected their assets or converted
retirement savings into guaranteed income during retirement,” said
Stephen Pelletier, president of Prudential Annuities. “Americans need to think beyond reaching a retirement
savings objective by understanding the risks associated with the timing
of their retirement decisions and evaluating ways to secure their
savings before they retire.”

A Prudential white paper on the findings of the study and
its implications for individuals and financial advisers, “Why Do
Individuals Retire When They Do and What Does it Mean for Their
Retirement Security?” is available on http://www.news.prudential.com/. The University of Missouri’s academic paper on the research is expected to be published in the coming months.